Merchandising Operations and the Accounting Cycle - Pearson
Merchandising Operations and the Accounting Cycle - Pearson
Merchandising Operations and the Accounting Cycle - Pearson
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Required<br />
Journalize <strong>the</strong>se transactions, first on <strong>the</strong> books of Drug Trading Co. <strong>and</strong> second<br />
on <strong>the</strong> books of Merck Frosst Canada Inc.<br />
Problem 5S-2 Journalizing purchase <strong>and</strong> sale transactions under <strong>the</strong> periodic inventory<br />
system (Obj. S2)<br />
Salimi Distributing Company Inc. engaged in <strong>the</strong> following transactions during<br />
May of <strong>the</strong> current year:<br />
May 3 Purchased office supplies for cash, $900.<br />
7 Purchased inventory on credit terms of 3/10 net eom, $6,000.<br />
8 Returned half <strong>the</strong> inventory purchased on May 7. It was not <strong>the</strong> inventory ordered.<br />
10 Sold goods for cash, $1,350.<br />
13 Sold inventory on credit terms of 2/15 n/45 for $11,700, less $1,800 quantity discount<br />
offered to customers who purchased in large quantities.<br />
16 Paid <strong>the</strong> amount owed on account from <strong>the</strong> purchase of May 7, less <strong>the</strong> discount<br />
<strong>and</strong> <strong>the</strong> return.<br />
17 Received wrong-sized inventory returned from May 13 sale, $2,700, which is<br />
<strong>the</strong> net amount after <strong>the</strong> quantity discount.<br />
18 Purchased inventory of $12,000 on account. Payment terms were 2/10 net 30.<br />
26 Borrowed $11,760 from <strong>the</strong> bank to take advantage of <strong>the</strong> discount offered on<br />
<strong>the</strong> May 18 purchase. Signed a note payable to <strong>the</strong> bank for this amount.<br />
26 Paid supplier for goods purchased on May 18, less <strong>the</strong> discount.<br />
28 Received cash in full settlement of <strong>the</strong> account from <strong>the</strong> customer who purchased<br />
inventory on May 13, less <strong>the</strong> discount <strong>and</strong> <strong>the</strong> return.<br />
29 Purchased inventory for cash, $6,000, less a quantity discount of $1,200, plus<br />
freight charges of $480.<br />
Required<br />
1. Journalize <strong>the</strong> preceding transactions on <strong>the</strong> books of Salimi Distributing<br />
Company Inc.<br />
2. The note payable signed on May 26 requires Salimi to pay $90 interest expense.<br />
Was <strong>the</strong> decision to borrow funds to take advantage of <strong>the</strong> cash discount wise or<br />
unwise? Support your answer by comparing <strong>the</strong> discount to <strong>the</strong> interest paid.<br />
Problem 5S-3 Journalizing purchase <strong>and</strong> sale transactions under <strong>the</strong> periodic inventory<br />
system (Obj. S2)<br />
Segal Furniture Company Ltd. engaged in <strong>the</strong> following transactions during July of<br />
<strong>the</strong> current year:<br />
July 2 Purchased inventory for cash, $1,200, less a quantity discount of $225.<br />
5 Purchased store supplies on credit terms of net eom, $675.<br />
8 Purchased inventory of $4,500, less a quantity discount of 10%, plus freight<br />
charges of $230. Credit terms are 3/15 n/30.<br />
9 Sold goods for cash, $1,800.<br />
11 Returned $300 (net amount after <strong>the</strong> quantity discount) of <strong>the</strong> inventory purchased<br />
on July 8. It was damaged in shipment.<br />
12 Purchased inventory on credit terms of 3/10 n/30, $5,000.<br />
14 Sold inventory on credit terms of 2/10 n/30, for $14,400, less a $900 quantity<br />
discount.<br />
16 Paid <strong>the</strong> electricity bill, $400.<br />
20 Received returned inventory from <strong>the</strong> July 14 sale, $600 (net amount after <strong>the</strong><br />
quantity discount). Segal shipped <strong>the</strong> wrong goods by mistake.<br />
21 Borrowed <strong>the</strong> amount owed on <strong>the</strong> July 8 purchase. Signed a note payable<br />
to <strong>the</strong> bank for $3,867.50, which takes into account <strong>the</strong> return of inventory on<br />
July 11.<br />
21 Paid supplier for goods purchased on July 8 less <strong>the</strong> discount <strong>and</strong> <strong>the</strong> return.<br />
Chapter Five <strong>Merch<strong>and</strong>ising</strong> <strong>Operations</strong> <strong>and</strong> <strong>the</strong> <strong>Accounting</strong> <strong>Cycle</strong> 295